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Mukul Munish

Francis Ka

1970:Graduated from the Univer sity of Hong Kong and start ed at Exxon.

1972:Joined Richardson  Greenshields of Canada.

1985:Started a 5-year stint as a  director of the Hong Kong  Futures Exchange.

1996:RBC Group acquired Rich ardson Greenshields. Pro moted to V-P and director of  RBC Investments.

1999:Joined RBC's chairman's  council members.

FOR THOSE INVESTORS hard hit by the market slides of recent years Francis Ka, president and director of RBC Investment Services (Asia), has one prudent piece of advice. Be patient with your equity investments and be a long-term investor in the market.

'In the long term you always win. Secondly, you should not second guess the market,' said the veteran executive of the Royal Bank of Canada's Asian subsidiary.

And investors should always diversify as a rule to hedge their investments in times of trouble.

'The best strategy is don't buy one stock. Diversify, buy a number of blue chips. Also use dollar averaging . . . buy stocks three to four times for dollar averaging. It's a very traditional investment strategy but it helps,' said Mr Ka, admitting that he was a 'traditional' investment adviser.

Mr Ka has good knowledge of the investing habits of Hong Kong investors, as for the past three decades he has had supervisory experience in the finance industry, and is responsible for overall direction of investment advisory services for the wealth management division of the Royal Bank of Canada in Asia.

In Hong Kong the bank is mainly involved in advisory functions, private banking and trust services. 'We are concentrating on niche marketing. We take clients who have a quarter million to half a million to invest. Such investors are of no interest to big private banks,' said Mr Ka.

He said every major global market went through a cyclical period. 'We are quite close to the end of the bear market,' he said, talking of the United States' stock markets. To back this point, he said, he had developed a theory that every cycle had four stages -  disbelief, scepticism, confirmation and excessive optimism. 'The bulls and the bears go through this cycle in that sequence,' he said.

Investors went through the disbelief stage after September 11. 'We saw what happened to Dow Jones for the first five trading days after it opened on September 21. Investors dumped stocks in panic,' Mr Ka said.

Since then the global markets have stabilised, only to take a beating in the second quarter.

'That was a one-off thing, that's unfortunate,' he said.

So going by Mr Ka's theory, we are through the disbelief stage and on to the second stage - scepticism. '[We are] in post-bear, pre-bull stage. In the scepticism stage you should get into [the market],' he said.

Strategists say the US stock market's latest rally is at a critical point that may decide whether major indices continue to rise next month or pull back for a while. The blue-chip indices are getting back to their August peaks, when that late-summer rally stalled and sent stocks into a dive that ended at new bear market lows on October 9 - with losses of nearly 20 per cent.

Strategists point out that tech stocks are already beyond their summer peaks and still rising. The present rally dates from the latest lows and has taken the major indices into bull-market territory - gains of better than 20 per cent for blue chips and more than 30 per cent for the hot-tech stocks.

Mr Ka said that according to business dictionaries, 'Bull market by simple rule of thumb is a period in which a broad market index rises at least 20 per cent'.

Nasdaq has passed this benchmark once, while the S&P did it twice during the past year.

'Such frequent bull and bear phenomenon has happened in a period of one year, which is rare. So the current stock market is in a 'scepticism' stage,' he said.  This means that it is the right time to get into equities, but only US equities.

'The US market is a global leader in every way . . . you have to find out the bull and bear market of the US economy first,' suggested Mr Ka.

He also feels that the US markets are in for a strong rebound from the second half of next year because the Bush administration is trying hard to stimulate the US economy.

'[The stimulation of the US economy] has to do with the presidential election in the US, which is due in 2004. Every American president who wants to win a second term has to pay attention to the economy then. They can't leave this task in the last year [of their presidency]. They start paying attention to the health of the economy five to six quarters earlier.

'If you take that into account then President Bush would have to really start taking a close look at the [US] economy by the second half of the year, and also at that stage to boost the market,' said Mr Ka.

He said among the fiscal measures the Bush administration would introduce were permanently extending tax cuts, extending unemployment benefits and write-offs for new equipment investment.

'These fiscal measures may become easier after Bush won control of both the houses in last month's election. The administration is also considering doing away with taxes on stock dividends. This could be a big boost to the Americans as 50 per cent of the households own stocks,' Mr Ka said.

Fixed income does not excite this 'traditional' investment adviser as he says the time to make easy money in the bond market has gone. 'We are at the very end of the bond market rally . . . the next six to nine months the [bond] market is fine, but a year from now once the US economy starts improving the interest rates will go up again. The easy money on the bond market has already been made,' Mr Ka said.

He is quite bullish on exchange traded funds or tracker funds. 'If you don't know how to pick the stocks . . . buy tracker funds. Such funds are suitable for those who believe in the markets, who believe that the markets have levelled, have some kind of value.

'And for those who don't have the time to study individual stocks. Also tracker funds give you better insurance,' Mr Ka said.



Patience pays off in equities market